BOSTON ( TheStreet) -- Miller Tabak is a relative newcomer to Wall Street, but the firm has rapidly expanded trading and research by generating unique investment strategies. Its Best Ideas for 2011 comprises 10 stock picks. Three of its four small-cap selections are lesser followed and may offer significant upside in 2011. Here is a closer look.

3. Cracker Barrel Old Country Store ( CBRL) owns and operates Southern-themed restaurants.

Fundamentals: Cracker Barrel's stock has soared 45% in the past 12 months. Fiscal first-quarter revenue ascended 3% to $599 million, but net income increased 32% to $24 million, or $1.01 a share. The gross margin remained steady at 72% and the operating margin widened from 6.5% to 7.9%.

Cracker Barrel pays a dividend of 22 cents, translating to a yield of 1.6% with a payout ratio of 21%. The dividend has grown 11%, on average, in the past three years and 5.8%, on average, over the past five.

The balance sheet stored $25 million of cash and $579 million of debt, equal to a weak quick ratio of 0.1 and an elevated debt-to-equity ratio of 2.6, at quarter's end.

Miller Tabak's Thesis: Cracker Barrel is in a "sweet spot in the value spectrum," according to Miller Tabak, which expects it to gain market share within family dining and steal customers from mid-scale peers as unemployment remains a headwind. It is predicting 2.7% comparable restaurant sales growth in 2011 and 2.3% growth in retail operations. (Cracker Barrel sells memorabilia at stores adjacent to its restaurants).

Debt payment is no longer a concern and Miller Tabak has boosted its forecast of 2011 and 2012 new restaurant openings to 11 and 15, respectively. Most important, Cracker Barrel remains cheap, based on its peer valuation. Here is a closer look:

Trailing P/E: 14 (67% Industry Discount)
Forward P/E: 12 (60% Industry Discount)
Sales Multiple: 0.5 (82% Industry Discount)
Book Value Multiple: 5.6 (4% Industry Discount)
Cash Flow Multiple: 6.9 (54% Industry Discount)

Analyst Ratings: Analysts are bullish on Cracker Barrel. Eight, or 73%, advise purchasing its stock and three recommend holding it. Sidoti & Co. echoes Miller Tabak's $67 target. Stifel Nicolaus has a $65 projection and KeyBank expects a rise to $61. Morgan Keegan offers the lowest target, at $60, implying 11% of upside in the next 12 months.

2. FirstMerit ( FMER) is a regional bank based in Ohio.

Fundamentals: FirstMerit's stock has fallen 9.8% in the past year, but has rallied 5% in three months.

Third-quarter adjusted profit matched analysts' consensus estimate of 27 cents, remaining flat year-over-year due to dilution. Net income rose 27%. Sales advanced 21% to $200 million, but missed the consensus by 1.8%. The operating margin climbed from 33% to 39%. But, the net interest margin decreased beneath 4%. The tangible common equity to assets ratio remained strong at 7.5%.

FirstMerit pays a quarterly dividend of 16 cents, converting to a yield of 3.3% with a reasonable payout ratio of 68%. Quarterly return on equity, at 5.4%, lagged the regional bank industry average of 7.4%.

Trailing P/E: 20 (20% Industry Premium)
Forward P/E: 16 (Banking Industry Parity)
Sales Multiple: 2.9 (66% Industry Premium)
Cash Flow Multiple: 9.2 (37% Industry Discount)
Book Value Multiple: 1.4 (12% Industry Premium)

Miller Tabak's Thesis: FirstMerit falls into a favorable risk/reward category, given its low-risk assets. Miller Tabak recognizes that the worst balance sheets may offer the most upside in 2011, but favors FirstMerit due to expectation of a strong merger and acquisition environment in the second half of the year.

It believes FirstMerit will benefit from this trend because its high-quality asset base makes it an ideal target for a takeover. Conversely, it could scoop up distressed assets or competitors at reasonable prices given its strong balance sheet. Miller Tabak expects FirstMerit to double EPS between 2010 and 2012, giving its stock outstanding upside potential in 2011.

Analyst Ratings: The Street dissents with this bullish call. Currently, six analysts rate FirstMerits's stock "buy" and 10 rate it "hold." None rank it "sell." JPMorgan has a price target of $22 on the stock, suggesting 14% upside. Macquarie and RBC Capital Markets expect the stock to hit $21. KBW predicts that the shares will fall to $18.

1. Loral Space & Communications ( LORL) is a satellite communications company.

Fundamentals: During the past three years, Loral has grown sales 7.2% annually, on average, and boosted net income 63% a year, on average. Its stock delivered annualized gains of 36% over that span, outperforming U.S. indices by a wide margin.

Third-quarter GAAP profit tumbled 33% to $72 million, or $2.29 a share, as revenue increased 30%. The operating margin stretched from 6% past 12%. Return on equity, at 28%, beat the industry average of 17% and return on assets turned positive, climbing to 10%. Loral held $174 million of cash and equivalents, equal to a quick ratio of 0.8, and no debt at quarter's end. Loral is currently structured as a holding company.

Trailing P/E: 17 (45% Industry Discount)
Sales Multiple: 2.2 (43% Industry Discount)
Cash Flow Multiple: 53 (178% Industry Premium)
Book Value Multiple: 4.7 (38% Industry Premium)

Miller Tabak's Thesis: Loral owns Space Systems/Loral and has a 64% stake in Telesat. The company has filed for an IPO of Space Systems and Telesat's Board has indicated that it is exploring alternatives for the stake, so Miller Tabak expects a break-up with minimal tax leakage.

It estimates a "midpoint equity" break-up value of $91, suggesting 17% upside. This investment strategy qualifies as event-driven, risk arbitrage.

-- Written by Jake Lynch in Boston.


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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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